Supreme Court Quashes Criminal Proceedings Against HDFC Manager in Auction Fraud Case.


23 April 2025 Sarfaesi >> Corporate Law   |   Default or Fraud >> Debt Recovery  

The Supreme Court of India has allowed the appeals of an accused-appellant and set aside a common judgment and order of the High Court of Madras, thereby quashing criminal proceedings against him. The case of Sivakumar v/s The Inspector of Police & Another., arose from allegations of fraud in a property auction conducted by HDFC Limited under the SARFAESI Act.

The prosecution's case alleged that the accused, including the appellant who was a Manager at HDFC's Head Office in Thiruvananthapuram at the time of the alleged offence, suppressed the fact that a property being auctioned was already acquired by the Tamil Nadu Housing Board, thereby cheating the de-facto complainant who purchased the property in the auction.


 

 
 
 

The sequence of events revealed that in 2004, one Mr. A. Kannan had taken a loan from HDFC Limited, mortgaging his property in Tirunelveli. Upon default, HDFC initiated SARFAESI proceedings, and an auction notice was issued in May 2012. The de-facto complainant participated in this auction and purchased the property in July 2012. However, upon attempting to register the sale certificate, she discovered the property had been acquired by the Tamil Nadu Housing Board earlier.

Subsequently, the complainant filed a consumer complaint and a criminal complaint, leading to an FIR in 2014 under various sections of the IPC, naming the Branch Manager and the present appellant as accused. A chargesheet was filed, and the Judicial Magistrate took cognizance. The appellant's plea to quash these proceedings under Section 482 Cr.P.C. was dismissed by the Madras High Court, which found a prima facie case of cheating, forgery, and issuing a false certificate against him.

However, the Supreme Court noted a crucial aspect: the appellant was appointed as a Manager at the Head Office only in November 2014, well after the auction process and the issuance of the sale certificate in 2012. At the relevant time, he held the position of Assistant Manager, and only the Manager was authorized to initiate SARFAESI proceedings and issue the sale certificate, as per the Security Interest (Enforcement) Rules, 2002.

The Supreme Court highlighted that the sale certificate was issued by the appellant's predecessor, and the appellant had no direct involvement in the transaction from the auction's initiation to the certificate's issuance. Since he was not the authorized officer during the relevant period and was not a signatory to the sale certificate, the allegations against him were deemed baseless and not attracting criminal liability.

The Court concluded that continuing the criminal proceedings against the appellant would be an abuse of the legal process and cause a miscarriage of justice, as he had been implicated without due cause.
Consequently, the Supreme Court allowed the appeals, set aside the High Court's order, and quashed the criminal proceedings against the appellant arising from the case.


  

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002  

Section 482., Code of Criminal Procedure - 1973  

Code of Criminal Procedure, 1973